Continued pressure on East Timor over natural gas

By Jon Lamb

The East Timorese government is standing firm against pressure to sign a natural gas downstream processing deal for the Greater Sunrise field in the Timor Sea. Australian-based mining and exploration giant Woodside Petroleum, aided by the Northern Territory government, is pushing for the gas to be piped to and processed in Darwin, refusing to accept Dili’s preferred option of piping it to the southern coast of East Timor.

Greater Sunrise is one of the largest gas and oil fields in the Timor Sea. It was the subject of drawn-out negotiations from 2002 to 2006 between the then Howard Coalition government and the Fretilin government led by Mari Alkatiri. The original deal proposed by Australia would have guaranteed East Timor only a paltry 18% of the extraction revenues for a field which the East Timorese argued was almost entirely within territory that is part of their seabed. (Greater Sunrise lies 144km off the coast of East Timor, half its distance from Australia.) A compromise treaty was signed in January 2006, in which East Timor’s share of revenues equated to 50%, estimated at the time to be around US$14 billion over 40-50 years.

Liberal-Labor-Woodside

During the negotiations, Woodside worked hand in glove with the Howard government to pressure the East Timorese government to accept the miserly terms on offer and argued consistently against a pipeline to East Timor. It was joined in the fray by the NT Labor government. In April 2002, Clare Martin, then NT chief minister, told reporters after a meeting with PM John Howard where the processing of gas from Greater Sunrise was discussed: “What we talked about was gas in the national interest and I’m confident the prime minister and I are one about this — gas on shore is in the national interest.’’ Modelling prepared in 2002 by Dr Peter Brian of the National Institute of Economic and Industry Research for the NT Chamber of Commerce and Industry and the Territory Construction Association projected that piping gas from Sunrise to Darwin would create an economic benefit to the NT economy of $22 billion and 20,000 new jobs.

A decision and announcement on how the gas from Greater Sunrise is to be processed was due by last December 31, but was delayed by the opposition of the Parliamentary Majority Alliance (AMP) led by East Timorese PM Xanana Gusmao and by President Jose Ramos Horta. The AMP, like the Fretilin administration before it, has consistently pushed for gas from Greater Sunrise to be processed in East Timor. Woodside has claimed this option is too “risky” and expensive. A third option, promoted by Royal Dutch Shell — one of Woodside’s partners in Greater Sunrise, as well as a major shareholder in Woodside iself — is a giant offshore floating gas processing plant.

On January 13, the East Timorese government made two separate statements confirming that it had rejected both the Darwin and floating platform options. Manuel Mendonca, director of communications in the natural resources ministry, told Reuters news service: “From East Timor’s side, we just want to bring the pipeline to East Timor, and we have differences in position on the options so we will contract another company to develop Greater Sunrise, if Woodside does not change its position”.

Petronas & Petrobas

Mendonca added: “The Malaysian company Petronas is qualified to develop the Greater Sunrise field’’, and “we have good relations with Petronas and Petronas has helped us do much in the oil sector and they are ready to build a LNG [liquefied natural gas] plant”. The East Timorese government and Petronas announced in March 2009 that a feasibility study confirmed the technical possibility of a deep sea pipeline from Greater Sunrise to East Timor. At the time, Petronas CEO Hassan Marican told reporters: “We are still waiting for the next phase of the survey but the first phase encourages the government and Petronas to start discussing how to finance the LNG project’’.

In related developments, the Brazilian ambassador to East Timor announced in November 2009 that Brazil’s state-owned petroleum company Petrobras was interested in being a part of East Timor’s future oil and gas industry. Petrobras is the one of the largest companies in Latin America and a world leader in deep-water exploration technology.

The proposed LNG plant and export facility for the south coast of East Timor would be the country’s largest infrastructure project, estimated to cost US$8-10 billion. According to a Northern Territory News report on February 10, a decision on how the gas is to be processed is expected at the end of March. The article also stated that NT Chief Minister Paul Henderson “had told Canberra ‘stridently and emphatically’ that Sunrise gas should be piped to Darwin”.

There is increasing speculation that the East Timorese government will make its own announcement concerning the awarding of a contract to Petronas. However, a statement released on February 11 denied that a deal has been concluded with Petronas, adding: “It is also important to note that the Government of Timor-Leste has not given any downstream contracts for the Greater Sunrise project to any company including Woodside. The downstream segment will include the contract for transportation (the pipeline) and processing (the LNG-Plant).”